House Republicans are planning to hold a vote tomorrow on the radical “cut, cap, and balance” plan, which stipulates that the federal debt ceiling only be raised if a balanced budget amendment to the Constitution is sent to the states for ratification. As we’ve noted time and again, such an amendment is a phony solution to the nation’s budget challenges, and would force the government into actively making economic downturns worse.

But the current version of the amendment that the GOP is pushing is even worse than all that. In addition to preventing the government from taking steps to ameliorate an economic downturn, the plan would also cap federal spending at 18 percent of GDP. To get a sense for how radical this is, the House Republican budget authored by Rep. Paul Ryan (R-WI) — which eviscerated Medicare and Medicaid — still has spending above that level in 2040.

As the Center for American Progress’ Michael Ettlinger and Michael Linden noted today, actually getting spending down to that level would require 25 percent cuts in every government program, including the Pentagon and Social Security (or, of course, deeper cuts for every program that gets left untouched):

In 2016, for example, we estimate that total federal spending is likely to be around $4.4 trillion, or 22.9 percent of GDP. [...] Of that $4.4 trillion in 2016, about $520 billion will be interest payments on the debt — an area Congress can’t directly cut. That leaves about $3.9 trillion in noninterest spending, from which Congress would have to slash about $1 trillion in order to bring total spending down to 18 percent of GDP. This would require a 25 percent cut to everything in the federal budget — from Social Security to veterans’ benefits to the Pentagon to education. Congress could try to protect some programs from such severe reductions but then, of course, other areas would have to be slashed even more.

Cutting spending so deeply would reduce the federal budget to the level at which it was in 1966, when the country’s needs and demographics were very different. No President in the last 50 years, including conservative icon Ronald Reagan, has even proposed a budget with spending so low. But the GOP is willing to have the country default on its obligations unless Congress adopts this radical path.

Rep. Trent Franks (R-AZ)

Senate Minority Leader Mitch McConnell (R-KY) made headlines a year ago with his claim that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.” And in recent weeks, numerous lawmakers and presidential candidates have relied on the false tax-cuts-produce-revenues talking point to justify the GOP’s economic platform.

Presidential candidate and former Minnesota Gov. Tim Pawlenty extended the argument to all tax cuts, telling Fox News that “whether it be the Bush tax cuts, the Reagan tax cuts, or other tax cuts, they always produce an increase in revenue. There’s no dispute about that.” Rep. Joe Walsh (R-IL), presidential candidate Herman Cain, and former Massachusetts Governor Mitt Romney have all made similar remarks.

But Rep. Trent Frank (R-AZ) took the argument a step further by pinpointing an exact figure in the supposed revenue increase enacted by the Bush tax cuts in a July 15 interview with ThinkProgress.

We know that if we grow this economy, that nothing will do more good toward bringing in additional revenues to government. And that’s not to theory; that’s a historical observation. Even the much-maligned Bush tax cuts brought in an additional $100 billion a year to government coffers. We forget that unless someone is out there producing, there’s no tax revenue. There’s no revenue. There’s no nothing for anyone.

Watch it:

The data compiled by the White House’s Office for Budget and Management could not prove Frank to be more wrong. In fact, federal revenues from individual income taxes saw a $136 billion decrease between 2001 and 2002, the year the first round of the Bush tax cuts went into effect.

Although Frank could have been referring to a $97.8 billion increase in federal income tax revenues between 2003 and 2004, such a jump is largely dependent on an unexpected $57.6 billion rise in the corporate income tax revenues. Both rounds of the Bush tax cuts did not apply to the corporate income tax rates and thus had no role in 2004′s larger revenue intake.

Toward the end of the decade, the amount in nominal dollars did begin to increase again, reaching $1.16 trillion at its 10-year apex in 2007. But economists point to revenues as a percentage of national GDP as the true measure of how much federal receipts fluctuate over the years. And according to those figures, the individual income tax revenues never recovered from the blows Bush’s tax policy inflicted in 2001 and 2003, respectively.

During Clinton’s last year in office, the personal tax revenue collected measured up to 10.2 percent of GDP; in 2004, it only came in at 6.9 percent of GDP, the lowest figure seen since 1951 and almost a full percentage point below the lowest figure reported during Reagan’s presidency. Even before the housing bubble burst in 2008, the federal government was not seeing personal income tax revenues close to their pre-Bush tax-cuts levels when measured as a percentage of GDP.

Furthermore, a recent study released by the Economic Policy Institute on the Bush tax cuts’ economic ramifications finds that “the decade of the Bush tax cuts had, on average, lower revenue levels as a share of the economy than any previous decade since the 1950s” and that the two rounds of tax cuts increased the national debt by $2.6 trillion over the course of nine years. Alan Viard, a senior economist from the Bush administration, even admitted in 2006 that there is “really no dispute among economists” that the tax cuts drained federal revenue.

Ironically, in the moments before his defense of the Bush tax rates as good fiscal decision, Frank criticized President Obama as being out of touch “with all mathematical reality” when it comes to stymieing the growth of the national debt.

–Sarah Bufkin

Rick Perry when he was a Democratic legislator

Since moving into the governor’s mansion, Gov. Rick Perry (R-TX) has governed his state with extreme right-wing priorities. His latest budget shortchanges school children with $2 billion in education-spending accounting tricks, while creating a special tax loophole for yacht owners. His refusal to raise taxes has resulted in a ballooning of the Texas state debt, which rose to over $34 billion in 2009.

On Friday, the Texas Tribune published a fascinating look back into Perry’s years as a Democratic state legislator. Before switching to the GOP to run for Agriculture Commissioner in 1990, Perry was a conservative Democrat in a state still dominated by the Democratic Party. Journalist Jay Root notes that at the time, Perry was a true fiscal conservative and supported the largest tax hike in Texas history in order to balance the budget:

But Mr. Perry cast some votes and took a few stands that seem to be at odds with his fiscal conservatism today. The most vivid example is his support of the $5.7 billion tax hike in 1987, signed by Gov. Bill Clements, a Republican, opposed by most Republican members. The bill passed the House by a 78-70 vote.

Even without adjusting for inflation, the legislation triggered the largest tax increase ever passed in modern Texas, said Dale Craymer, president of the Texas Taxpayers and Research Association. Today, taking inflation into account, it would be worth more than $11 billion.

The hike Perry supported under Gov. Clements raised the sales tax, taxed insurance premiums, and made permanent a five cents a gallon increase in the gas tax. In 2006, Perry also backed a substantial tax hike when he tripled the amount the Texas government collects for franchise taxes on business.

Perry’s prior support for such large tax hikes speaks to how far politics have changed in the Lone Star State. Not only was the tax passed by a Republican governor, but it was voted into place by someone like Perry, who now touts his soak-the-poor but protect-the-rich budgeting as one of his most cherished beliefs. Unfortunately, corporate lobbyists posing as principled conservatives, like Grover Norquist, have changed the dynamics within the Republican Party and have ensured that politicians like Perry must radicalize their positions on tax policy if they want to succeed.

Indiana Rep. Todd Rokita (R)

Despite numerous warnings from three major credit agencies, economists, businesses, members of their own party, and general common sense, the Republican “Hell No” caucus remains ever vigilant in ignoring the economic disaster that will follow a failure to raise the debt ceiling by Aug. 2. While some Republicans have offered simply ludicrous reasons to paint the deadline as arbitrary, an increasing number are pushing the notion that there’s no danger at all in defaulting on our debt.

Today on ABC’s Top Line, Rep. Todd Rokita (R-IN) went one step further and threw away the word “default” altogether. While he views Aug. 2 as an “important date,” he refuses to “take the premise that we’re going to default on our obligations.” Believing “default” isn’t even the right word to use to describe the economic consequences, Rokita slammed those who would avoid default as “piggish” and “un-American” for worrying about “my own little program or my own little economy.” Rokita then declared defiantly that he’s willing to vote down a debt ceiling raise even if it means “the economy might get worse”:

ROKITA: We’ll learn to live within our means right now, in the here and now. And this might force that issue even if the economy does or the stock market does go down, the economy might get worse. The economy is terrible it’s been terrible for years now, and the reason it’s bad is not because of a debt-ceiling vote. The reason it’s bad is because we have people who believe that by making government bigger by keeping people on unemployment checks and on welfare we’re going to dig us out of this mess.

Watch it:

Rokita might not care to worry about the “little program” or “little economy,” but by refusing to raise our debt limit, he will force the U.S. to fail to meet its obligations on vital social programs including Medicare, Medicaid, defense, and active duty pay for soldiers. As the Bipartisan Policy Center pointed out, the country would have to cut Social Security benefits almost immediately.

Failing to raise the debt ceiling would force the Treasury Department to slash 44 percent from the budget overnight, a scenario that would not only wipe out all of the estimated 2011 economic growth in 95 days, but cause a 2.3 percent drop in GDP, rock an already fragile housing market, increase unemployment, and even tip the U.S. back into a recession.

Given the dire consequences, it is not hard to see why the American people already overwhelmingly disapprove of the Republican approach to dealing with the debt. By completely dismissing the severe consequences of his actions, Rokita is defaulting on “his own little” responsibility to our nation’s future.

Rep. Patrick McHenry (R-NC) playing a Nintendo Wii in his office

Rep. Patrick McHenry (R-NC) gained infamy in May when he went on a childish tirade against Professor Elizabeth Warren, who is currently setting up the Consumer Financial Protection Bureau as a special adviser to President Obama. McHenry, a former College Republican hack, repeatedly accused Warren of lying about the agreed-upon time for testimony she gave before Congress.

According to a ThinkProgress analysis of new campaign finance data released on Friday, McHenry received $63,800 from lobbyists and executives from banks, mortgage companies, payday lenders, pawn shop executives, and other predatory lenders in the last three months alone. Notably, much of the campaign donations from payday lenders came on a single day, April 20, 2011:

– Advance America PAC: $10,000 on 4/20/11
– Dennis Bassford, CEO of the Seattle-based payday lender MoneyTree: $4,600 on 4/20/11
– Sarah Bassford: $2,700 on 4/20/11
– Community Financial Services Association of America PAC (trade association for payday lenders): $5,000 on 4/20/11
– Checksmart Financial LLC PAC, an Ohio-based payday lender: $2,000 on 4/20/11
– A. David Davis, CEO of Ohio-based payday lender Check-n-go: $2,000 on 4/20/11
– Jared Davis, CEO of Ohio-based payday lender Axcess Financial: $2,000 on 4/20/11
– Roger Dean, CFO of Axcess Financial: $500 on 4/20/11
– EZCORP PAC, a Texas-based payday lender: $2,000 on 4/20/11
– Natl Pawnbrokers Assoc. PAC: $2,000 on 4/20/11

The surge of payday lender money to McHenry on a single day suggests the congressman had a campaign party with opponents of Warren. The Consumer Financial Protection Bureau is tasked with policing and regulating dozens of predatory lending practices. A few weeks after the predatory lending campaign money started flowing to McHenry, he used the hearing with Warren to berate a leading consumer advocate.

According to his latest financial disclosure, the McHenry household receives an income from the Brattle Group, an industry consulting firm that employs McHenry’s wife. The Brattle Group helps connect powerful industry groups with academics to produce reports that can be used during testimony or lobbying campaigns — the same type of firm highlighted by Charles Ferguson’s investigative documentary Inside Job. In conjunction with the Community Financial Services Association of America, a trade association for predatory lenders, the Brattle Group produced a study claiming that payday lending never results in cycles of debt for its customers. According to its website, the Brattle Group also represents banks, credit card companies, and other businesses in the financial industry.

Asked by ThinkProgress if the Brattle Group is working for any of its clients on Dodd-Frank implementation or any issues related to the new Consumer Financial Protection agency, a representative said they would not supply such information.

Today, President Obama will nominate former Ohio Attorney General Richard Cordray to be the first director of the Consumer Financial Protection Bureau that was established by the Dodd-Frank financial reform law. Cordray is currently the bureau’s director of enforcement. “Richard Cordray has spent his career advocating for middle class families, from his tenure as Ohio’s Attorney General, to his most recent role as heading up the enforcement division at the CFPB and looking out for ordinary people in our financial system,” Obama said in a statement.

The clear first choice to head the Bureau was Professor Elizabeth Warren. The very idea of a consumer protection agency was hers, and she has been setting the Bureau up as a special adviser to the President. That said, Cordray has a clear pro-consumer record, and has not been afraid to challenge the banks, making him an ideal candidate to lead the bureau when it officially stands on its own this week.

He was at the forefront during the foreclosure fraud scandal, and was “the first to sue a mortgage lender over incidents of foreclosure fraud,” launching a suit against GMAC Financial. “What we’re talking about here is not just sloppy paperwork,” Cordray said at the time. “We’re talking about fraud in a court of law. The [foreclosure document signers] were lying under oath, to a judge.” He’s called the foreclosure practices of the nation’s biggest banks “a business model built on fraud.”

As attorney general, he supported efforts to rein in payday loans, one of the most pernicious financial products. Cordray backed legislation to cap the interest rate that payday lenders could charge and sought the ability for his office to prosecute unlicensed lenders.

The financial industry is already up in arms about his nomination, with one attorney who represents the industry saying that of all the bureau’s officials, Cordray “frightens me the most.” Another derided him as having “all the hard edge and ambition of Warren without the charm.” Warren herself supports the choice of Cordray, writing in an op-ed today that “he will make a stellar director.”

Already, Senate Republicans have said they won’t confirm Cordray (or any nominee to the lead the bureau), begging the question of why the administration passed over Warren, since its argument is that she is unconfirmable. “Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it,” said Sen. Richard Shelby (R-AL). But the politics of the situation don’t take away from the fact that Cordray has an excellent record and is absolutely qualified to head the bureau.

GOP presidential primary candidate Herman Cain has often spoken of his economic bonafides, bragging that he will “jump start the economy” with a slew of drastic tax cuts on corporations and the richest Americans if he is elected in 2012 .

But during a radio appearance alongside fellow Atlanta radio hosts Neal Boortz and Clark Howard in May of 2008, Cain revealed exactly how little economic sense he has. Moderator Jeff Hullinger asked the three hosts if they thought the United States was in a recession. Howard said he thought it was, while Boortz and Cain disagreed.

Cain went on to explain that “liberal leaders have demagogued” the idea that the United States in a recession, but in reality there are only individuals in “personal recession”:

HULLINGER: Are we in a recession, or are we not in the midst of a recession?

BOORTZ: No.

HOWARD: Yes.

CAIN: No. [...]

CAIN: Let me elaborate on the no. [...] The reason that the administration does not use the R word is because there are three economies: the national, the local, and the personal. So what has happened is the liberal leaders have demagogued the idea of recession because some people are in personal recession, but the national economy is not in a recession. [...] I’m talking specifically about Nancy Pelosi, the Democrats in Congress, Harry Reid, that leadership, they are convincing some people that the whole nation is in shambles because of some individual personal recession.

BOORTZ: And usually because of their own individual personal decision making.

CAIN: Yes!

Watch it:

Cain was obviously wrong. The National Bureau of Economic Research found that the recession began in December 2007, five months before Cain told radio listeners that the recession was just in their heads. Cain’s comments seem to echo that of former top McCain economic adviser Phil Gramm, who said in July 2008 that the United States was simply in a “mental recession.”

As of July 13, 29 public companies had more cash on hand than the U.S. Treasury Department, according to the site Zero Hedge based on numbers from Capital IQ. It’s a stark reminder that if Congress refuses to raise the debt ceiling, the government won’t have nearly enough money to continue funding essential services and programs.

In the first half of July alone, Treasury cash balances were depleted from from $130 billion to just $39 billion. That means the most powerful nation on earth currently is tied with Google for the amount of cash that it has, and is less flush than Bank of America, JP Morgan Stanley, and Goldman Sachs, among others.

American companies are highlighted in yellow.

Two of the top three companies are Chinese, while Bank of America comes in third. The numbers effectively rebut Republican claims that the government has plenty of money to keep funding essential services while paying down its debt. It also belies GOP claims that companies are in need of lower corporate taxes. American corporations have a record amount of cash — they are just refusing to invest domestically while lobbying for tax breaks.

Several Republican candidates have called for drastically lowering the corporate tax rate, while congressional Republicans are refusing to concede in debt ceiling negotiations that corporate tax loopholes should be closed to give the government more much-needed revenue.

The Treasury’s cash balances will go back up once more revenue comes in, but on Aug. 3, the government’s savings account will be nearly empty and President Obama would be relying on daily tax revenue to pay the nation’s bills. But there won’t be enough — in fact, there would be a $134 billion shortfall in August alone. The small amount of money available to the Treasury will leave the government facing impossible choices about what to cut.

This week, House Republicans plan to engage in some political theater, voting on a plan that would only allow the debt ceiling to be raised if a balanced budget amendment (complete with a cap on federal spending) is approved by Congress and sent to the states for ratification. Speaker of the House John Boehner (R-OH) has said that the so-called “cut, cap, and balance” plan is “a solid plan for moving forward.”

However, several Republicans who back the “cut, cap, and balance” plan only seem to care about those principles in the abstract. Bloomberg asked some who support the plan what government programs they would cut in order to balance the federal budget, and they either didn’t know or refused to answer:

Hatch, a Utah Republican facing re-election in 2012, wouldn’t offer specifics on entitlement cuts or say which federal departments he would close to reach a balanced budget.

“When the time comes, I’ll name them,” said Hatch. “I don’t want to do it right now, because we have to pass that amendment.” [...]

Representative Flores, a freshman Republican, said he couldn’t name specific cuts “off the top of my head.”

Identifying cuts isn’t necessary at this point, he said, because the voters aren’t “trying to get down in the weeds on where the cuts would come. They want the balanced- budget amendment.”

Asked what cuts he would make to comply with a constitutional amendment, Representative Allen West, a first-year Republican from Florida, didn’t cite specific programs yet pointed to a Government Accountability Office study earlier this year that identified “about $200 billion of duplicative and redundant government programs.”

This sounds a lot like the 2010 election campaign, where Republicans railed against government spending but then were chronically unable to name a single program that they were willing to cut.

As we’ve noted before, a balanced budget amendment would force the government to make economic downturns worse, by slashing spending when the economy needs support. Under a balanced budget amendment, the radical House Republican budget authored by House Budget Committee Chairman Paul Ryan (R-WI) would be unconstitutional, as it doesn’t cut spending fast enough.

Bill Hoagland, a budget adviser to Republican leaders from 1982 to 2007, called the amendment “a political cheap shot,” while Scott Galupo, a former staffer for Boeher, has called the idea “quite simply, insane.”

Bruce Bartlett, a former economic adviser for Presidents Ronald Reagan and George H.W. Bush, noted that the amendment is a phony solution to the budget mess that allows Republicans to support a balanced budget while not having to “support anything politically unpopular.” Indeed, as the Republicans quoted above make clear, they really have no idea how they’d balance the budget; they just want it to magically balance itself.